Good morning, good evening, good afternoon. Welcome to the 83rd Emerging Growth Conference, day one of our two-day super virtual investor conference. I'm Anna Berry. Today we're running until 4:00 P.M. Eastern. When we switch to the next company, you'll see a black screen for a moment. Don't go anywhere, just us moving over to the next company. If you experience downtime, refresh your browser. It usually works properly once you do that. Our platform does work best on Google Chrome. All of our conferences, they're uploaded to the Emerging Growth Conference YouTube channel. Please subscribe, youtube.com/emerginggrowthconference. During each company's presentation today, you could submit questions through the webcast module, and we will attempt to address as many of these at the end of the presentation. Let's begin. 51Talk Online Education Group trades on the NYSE American under the symbol COE.
It's a global online education platform with core expertise in English education, whose mission is to make quality education accessible and affordable. So happy to welcome David Chung today, the VP of IR. Welcome, David. Welcome to our conference.
Thank you, Anna.
All right, the floor is yours.
Thank you. Okay. S o good morning, everybody. My name is David Chung. I'm the VP of Investor Relations at 51Talk. Thank you for taking the time to join us for the presentation today. In the next five to 10 minutes, I'll be walking you through how 51Talk, as an NYSE American company, our ticket code is COE, is combining localization, technology, and people in building an online education business globally. After that, we can open up the floor for questions. Let's start with the big picture. 51Talk is an AI-driven edtech platform serving young learners around the world. We're not just offering English lessons. We're providing an integrated, adaptive learning experience that combines proprietary curriculum, high-quality tutors, and advanced technology. Our goal is to make high-impact education accessible and relevant in every market we enter. What makes our platform different is our integrated approach.
We've built our solution on four pillars: a proprietary curriculum with over 500 hours of refined content, a rigorous AI-enhanced tutor recruitment process, over $100 million invested in our proprietary technology, and a free 360-degree parent and student support model. In the next couple of slides, you will see how each pillar then reinforces the others to deliver results. First, our curriculum is fully animated, interactive, and aligned with CEFR global standards. Second, our tutors are selected through a stringent process, with only the best making it through. Every tutor benefits from AI tools and ongoing training, ensuring quality and consistency at scale. Third, our technology platform is robust and scalable. We have low-latency videos, gamified classrooms, and features like virtual makeup for tutors. Finally, our 360-degree support ensures every student has a personalized learning path and ongoing guidance from a dedicated learning partner, maximizing both engagement and satisfaction.
Global presence means local adaptation for us. In every market, our curriculum is customized to fit local school requirements and cultural expectations. Local teams provide direct support and guidance, and our marketing is tailored to reach parents and students where they are. This proven approach has helped us build trust and drive engagement in diverse regions, from East Asia to the Middle East and beyond. AI powers every part of our operations. Our tech stack includes LLMs, proprietary infrastructure, and advanced automation, supporting everything from telemarketing to personalized student support. We've developed tools for tutor screening, lesson personalization, and adaptive feedback, all designed to improve efficiency and outcomes. Let's look at some AI application highlights. In tutor recruitment, AI evaluates pronunciation and accent. For every new hire, AI assists in screening, interviewing, and training, reducing cost and speeding up onboarding while maintaining high standards. AI also enables truly personalized learning.
Every student receives an individualized model and learning path, with real-time feedback through features like AI coaches, lesson memos, and situational practices. This personalization drives better engagement, faster progress, and higher satisfaction. Our sales process is also optimized by AI, which has already improved our conversion rates and reduced idle times during the sales process. AI supports tutors during lessons, helping them deliver high-quality instruction. We recently saw our first paying student complete a fully AI-powered trial class as well. Turning to our numbers, following our China divestment, we're now fully focused on international markets. We're audited in the U.S. and headquartered in Singapore. Revenues are growing, margins consistently exceed 70%, and our cash position is strong. We're expanding with discipline, focusing on profitable and sustainable growth, not just headline numbers. To close, 51Talk is uniquely positioned at the intersection of global reach, local expertise, and cutting-edge applications of AI.
We are committed to unlocking long-term value in the edtech sector, one student, one market at a time. Thank you for your time. We can now open up for questions. Thank you, Anna.
Perfect. Thank you, David. Yeah, so talk a little bit more about your country expansion strategy.
Sure, thank you. That's a question that we do get quite often. Obviously, expanding into new markets, new regions, it's a key part of our overall growth strategy. We are already active in Southeast Asia. We have local presence in Thailand, Malaysia, for example. We're also testing new markets like Vietnam and Indonesia. We're also very active in the Arabic markets, in particular Saudi Arabia. We are always on the lookout, in particular for, for example, in Spanish-speaking regions, as other potential opportunities. When selecting a market, we generally look for a relatively large middle-class children population base and with low cost of acquisitions to justify our unit economics and the operating cash flow. Once we are comfortable with that set of metrics, then we will focus on making our marketing and service fit into that market. We would build local offices.
We would send experienced leaders from existing regions to the new markets, hire new local on-the-ground staff. That blend of experienced leaders with on-the-ground local staff is our proven method to expand into new markets. We would obviously also adapt our products and services to match the local languages, customs, and styles. All of these take time. Once we're set in the market, our experience is that it's hard for local competitors to match this mix of central strength and on-the-ground teams. Usually, what we see is that in terms of the competition, either they have a very strong centralized product that maybe does not necessarily fit local customs or local needs, or there are very strong on-the-ground local teams, maybe offline presence as well, but not the centralized operation strength that we have.
We believe we have a strong competitive edge combining the central operational strength and our on-the-ground teams. That gives us a very strong edge over some of our competitors in the markets that we operate in.
How exciting for that expansion. You are making some losses in the P&L, yet your cash position is strengthening. Talk a little bit about the logic behind that.
Sure. So this explains we also take this opportunity to try to explain sort of our business model. In our business, in education, what happens is we spend money to acquire students now, but the lessons actually happen later when the students take up the classes. What happens is we receive the cash upfront as the parents pay for the course packages. The accounting recognition of that cash as income and profit comes in the future when the student actually takes up the classes. Therefore, when we grow, you will see that our billings are actually higher than our revenues. If you look at our cash balances in the balance sheet, our cash balances actually continue to grow as well because our payments, we collect payments upfront.
Great.
One way to look at this is, sorry, just to elaborate a bit more. One way to look at this is you can, for any given quarter, you can look at the billings minus the operating expenses that we have. That gives a good indication of the cash profitability for any particular quarter. Also, in the shareholders' equity, you will see that we actually have negative shareholders' equity in the balance sheet. Again, that will translate over time to positive as the revenue gets recognized, the profit gets recognized, and then we have more retained earnings.
With all of that, do you still need to raise capital to fund this growth?
Sure. Just to explain a bit more about the business model, right now, we strongly believe in growing with the cash that we receive from our students, the students paying for our products, and not growing by the cash that we receive from investors, investment capital. We really want to let our users decide on our future. That is the students and the parents. When you look at our filings, you can also see that our founder and CEO, Jack, has been consistently and continuously buying shares on the open market as disclosed on the SEC filings. We believe that also gives a strong signal that the company does not need, or is not looking to raise capital in the near term to fund that growth.
OK, perfect. Talk about some other products and services you're planning to expand into.
Sure. The management team is always in discussion about new products and how we can add more value to the existing customer student base that we have. Our core product remains the one-on-one K-12 English lessons. That is our key core product. We are continuously looking at how we can build services and products that are related to this core product. That could mean more subjects or exam preparation. What we find is that each market is different, and the students there have unique needs. It is very market-specific. We develop also market-specific programs or services to address that particular needs in the markets that we operate in. Again, for every initiative that we have, we check the market size. If it is something that we have strength, we can do it well. Also, the competition out there.
We always ask ourselves if we are the best to take it on. If we have all these and we're comfortable with that, then we will invest and develop that business.
Perfect. Talk about China. Do you still have businesses in China? If not, are there possibilities of reentering that space?
Sure. That is another question that we get quite often because of our background. I think investors see that some of our peers in China have their businesses picking up again as they adjust to the new regulatory environment. Our core business, again, is using foreign teachers to teach students. We will need to continue to monitor the regulatory stance regarding this. We would also stress that what we are actually good at is using Chinese talent, Chinese R&D capabilities to teach students around the world in a localized way. We find that not many can do this well. We see that the global education market is still large, even without China. We think that we can continue to create more shareholder value and build higher entry barriers by doing what we are good at and not sort of risk our—so it is an opportunity cost idea.
Right now, the competition that we see globally in some of the markets is not as intense as that could be in China. We are investing our resources, our time, and efforts in those markets that we see have opportunities and relatively lower competition. Of course, the environment can change. Maybe in the future, it makes sense for us, for our shareholders, to serve Chinese students again with the technology products that we're developing. Right now, that's not something that we're focusing on right now.
Perfect. David, since we started a little late, we're going to continue on with some questions. Frank asks if you can explain your revenue model, and is it recurring?
Sure. The revenue model, as we discussed earlier, is we sell a course package to our parents. It's basically usually a lump sum. In some markets, there can be a sort of by installment payments. Usually, the students would renew. Usually, the course runs for about the overall learning period we find, in our experience, is usually about one year. There will be maybe renewals for that course package over that one-year period. That is sort of roughly the time frame that we have. In different markets, that lump sum amount, that course package amount, is different as well. It depends on the markets that we operate in. I'd say, yes, the business, the revenue is recurring to an extent. That is something that we continue to work on, is to have continual recurring packages or paying packages for the students.
With that, Cooper wants you to expand on how you scale. Is it geographical, or is it by product, maybe both?
Yes. Right now, again, the core product is the one-to-one online English classes by foreign teachers. We are continuing to see demand for that core product in different markets. Again, we have to make sure we get the unit economics right. We have to make sure that in each of the markets we enter, because we just invest so much in the localization, we have to make sure that initially the overall macroeconomics makes sense. There has to be enough sort of middle-class population of children. Overall, yes, I think we're looking at the overall market size, the unit economics, the customer acquisition cost. Our focus is on sustainable growth. For each of the markets that we enter, we also have to make sure that we have basically at least break-even operating cash flow for the quarter as well.
We are very, very stringent on our business model. Geographical expansion into new markets is definitely one area that we will continue to see growth in. The other, I should mention, is new products. In terms of new products, as we discussed earlier, we continue to explore new products for our existing customer student base. It really depends on the markets that we operate in. Different markets, we find that different markets, different students have different habits, different behaviors. Right now, we're still trying to continue to explore. We have different products and add-on products for different markets. Right now, we're also exploring if there's sort of a second or third product that we can scale at a global level as well. I guess to sum up, right now, the key to expansion is still in terms of more markets.
In the medium to long term, in the future, we do see more product lines as well.
Greg wants you to talk a little bit about the competition in the space and AI. Is this unique to your platform? If so, can you detail how the AI is going to push you ahead?
Sure. AI is something that we get questions about quite often. That is really because obviously, online education in particular is one of the industries that will be most affected. What we see is it will definitely change a lot of things. When and exactly how, it is still quite uncertain. What is probably going to happen, it is going to happen faster than most people expect. For us, as discussed, we do have an R&D platform. We do invest in our research and development teams. We have an AI Institute, for example, that we make sure we do not fall behind in the developments of AI and its applications in the education industry. We actually have AI training for our staff. Every week, I go on an AI training from our team in AI.
I think for our company, AI is not just for technology people. It's also for all parts, different departments. We are all learning how we can use AI to improve our efficiency. Specifically, in terms of what our users can see, for example, we have recently had a fully AI-powered class that's done by an AI tutor. We managed to close a package using a fully AI-animated tutor. That's one of the things that we are exploring. In terms of because at the same time, we believe that we are in a very unique business. It's not easy because we mainly teach children. It's not easy to keep a five-year-old motivated to learn for 30 minutes. We believe that it's not just the knowledge transfer.
It's also about keeping the child engaged and making them open their mouth and speak in a new language, basically. That's what we find the parents expect from us. We are also learning how we can use AI to do that better, basically. For example, one of the things that we have is an AI genie in our product. With our students, who have English as a second language, when they communicate with the foreign teachers, they may not have the necessary English level to communicate immediately or at least be confident to communicate with a foreign language teacher. With AI, what happens is the AI can do almost instant translations that can help the teacher better engage with the child.
These are all things that we see how AI is improving our user experience, improving our tutor's ability to engage with children.
Fascinating. Question from Ade. Are you selling any hardware?
No. Hardware is not a sort of core key product that we do. In certain markets, we do have some hardware products that we use as a supplementary to the core product. That's not something that our focus is on.
Last question, probably due to time. Chris asks, what's the term of each agreement? And how many renewals are you seeing?
The term of each package is, again, about one year. In terms of the renewal, we do not really disclose that as an official number. Let me share some trends in terms of the renewals. In the more mature markets, we will definitely have more renewals and referrals. In more mature markets that we operate in, we tend to have better referral ratios, better renewal ratios. Thus, the marketing expenses as a percentage of the revenue tends to trend downwards over time for us. Whereas in the newer markets, we would tend to spend more on the social media, on lead generation, basically. The marketing expenses initially in a new market would probably tend to be a little bit higher just to get us off and running.
Over time, as customers learn more about us, learn more about our brand, our products, that marketing expense as a percentage of the total revenues tends to trend off. We have overall better net margins as the market matures.
Wonderful. Really interesting industry that you're in. Thank you so much for joining us today on the conference and being patient while I sat back up. We do have more questions for you, but we're out of time. We'll send these to you, David, so you and your team can answer them on your own. We certainly hope that you come back on the Emerging Growth Conference very soon.
Thank you so much, Anna. Great to be.